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Why Ethnic Retailing Surges Despite Tough Times

Why Ethnic Retailing Surges Despite Tough Times

It's hard out there in retail land, really hard. But you wouldn't know it by tracking the momentum around ethnic retailing.

In recent weeks there's been a groundswell of retailer news about plans for ethnic initiatives, particularly those catering to Hispanic customers:

  • Sam's Club is about to test a new club store concept geared to Hispanic shoppers that carries products from Mexico.

  • Nash Finch reported “great results” with its Avanza Hispanic-themed format in 2008 and wants to add more such outlets next year.

  • Delhaize Group said a Hispanic-focused pilot Food Lion concept introduced this summer in North Carolina will get a “major rollout” next year.

  • United Supermarkets of Texas is planning additional units after the successful launch of its Amigos banner.

So what's going on here? Why are food retailers committing capital to new formats during such a deep downturn? Demographic trends are certainly part of it, but there's more. Retailers have discovered that ethnic retailing doesn't have to be a niche concept that excludes other shopper groups, but can be inclusive in a way that grows the overall base.

United's Amigos format, for example, aims to be a place for both Hispanics and mainstream customers, as noted in a story published in last week's SN in a supplement called “Ethnic Sourcebook.” United's goal is achieved partly through a cross-merchandising program around meals.

“We've found that some of our mainstream guests are coming in more frequently, because they now have more options,” noted Juan Enchinton, business development manager for innovation at the company's International Stores division.

Another example of growing the customer base comes from a non-mainstream retailer: Sedano's, the nation's largest Hispanic supermarket. A new ad campaign aims to target not only the retailer's traditional customers, first-generation Hispanics, but also to broaden the message to a newer group of bilingual, acculturated Hispanics.

One of the emerging truths about ethnic retailing is that it can be pulled off by big and small players alike. The world's largest retailer, Wal-Mart, continues to make headway in this realm, and recently established a multicultural marketing department and new programs for Asian Americans. Recently the chain piloted a micro-site geared to Vietnamese American consumers, with information available both in English and Vietnamese.

However, the participation of a retail giant like Wal-Mart doesn't easily scare off independent retailers. In an ethnic roundtable also published in last week's SN, participants said that independent retailers have the ability to present more locally targeted and extensive assortments than a major chain.

While the discussion here is chiefly about Hispanic merchandising, many of the same points apply to kosher, Asian and other ethnic segments. Ethnic retailing is a sector that is far from maturing, isn't hurt by new competition and appears to thrive in any economy. How many other sectors can you name that meet all of those criteria?